Manufacturing Growth Slows as Labor Supply Contracts

Despite a slowdown from the month of August, the Institute for Supply Management’s September 2014 Manufacturing Report on Business shows that the US economy expanded in September for the 64th consecutive month, and the manufacturing sector posted its 16th consecutive month of growth. Of the 18 manufacturing industries, only machinery; plastics and rubber products; and electrical equipment appliance and components reported contraction in September. The other 15 industries reported growth.

Decreasing Unemployment Makes for Labor Shortage

Labor has become a commodity in short supply. As demand and employment grow, it is getting harder to find good labor. A respondent from the machinery industry said, “Our search continues for good machinists and electrical engineers.” As the economy and employment rate continue to grow, it does not come as too much of a surprise that labor is beginning to get tougher to find. More people are starting to have a choice in job opportunities, as the national unemployment rate decreased in September to 5.9% according to the jobs report released by the Bureau of Labor Statistics.

The only index that reported contraction is the backlog of orders despite the growth in new orders. This could be due to the growth in employment, production, and inventories. Although the rate of growth in September slowed in comparison to August, the industry is continuing to look better across the year, and one respondent pointed this fact out, “We are seeing shipments up, year-over-year, in the 8 to 10 percent range for the last couple months.”